2023 in review: Broader market stood out with remarkable gains; 2024 to be volatile, says Rajesh Bhosale of Angel One

As many analysts had predicted, 2023 turned out to be a remarkable year for the Indian market, with notable project launches, favourable macroeconomic factors, and exceptional performance across multiple sectors. This noteworthy year has seen a surge in the value of mid- and small-cap stocks, as well as a record number of initial public offerings (IPOs). After surpassing 19,000 in June, the Nifty 50 has now set several records this year, including 21,500 in December and 20,000 in September.

The year 2024 is expected to be very volatile with an underlying bullish trend, according to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One. This is because there are two budget sessions, a significant election in our country, and a US election coming up.

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Bhosale talked extensively about mid-caps and small-caps, important sectors to stay away from or keep an eye on in 2024, significant drivers, and shared some trading advice in an interview with Mint. Edited excerpts:

1. 2022 was a muted year, as we did not see major traction in the market. Undoubtedly, we bounced back from lower levels, but when we consider the total gains, 2022 was not that big. On the other hand, 2023 has picked up steam again, and the Nifty 50 has gained about 19% since the year's beginning. Which key variables will dominate the market in 2023?

We can characterise the market as being in excellent shape following the upheaval caused by the 2020 COVID pandemic. Reflecting on the events of 2022, it proved to be a year filled with significant occurrences, such as the Ukraine-Russia war, which led to escalating inflation and interest rates. Despite these challenges, achieving gains in that year is quite noteworthy. Interestingly, the same factors that constrained prices in 2022 and contributed to a cooling effect are now driving a robust performance in 2023. Notably, positive momentum has surged in the last two months, propelled by foreign institutional investors (FIIs) expressing confidence in our markets due to the prospect of a stable government in the future. Additionally, the global markets have experienced substantial improvements following the recent Federal Reserve policy outcomes.

Also Read: Budget 2024: Expect no big announcements; market to see stock-specific movements, says Yogesh Patil of LIC Mutual Fund

2. Talking about the broader markets, the mid-caps and small-caps have been the star performers of 2023, leading the rally. Will 2024, too, be fruitful for this space? Given that mid-cap and small-cap stocks make up portfolios, what advice would you give traders?

The standout feature of the 2023 bull run is the captivating surge in mid-cap and small-cap stocks, which typically constitute a significant portion of retail investors' portfolios. Their impressive performance has brought broad smiles to the investor community. Looking ahead to the next year, despite the ongoing momentum favouring this segment, it's crucial to acknowledge that it will be a dynamic period. With two budget sessions, a pivotal election in our country, and a US election on the horizon, the upcoming events are poised to introduce volatility and uncertainty. Typically, during such times, institutions and significant investors tend to lean towards safer options like frontline counters rather than the small and mid-cap baskets. Therefore, there's a realisation that the upcoming year may not replicate the same level of performance, supported by technical evidence indicating high overbought conditions.

Also Read: Budget 2024: Govt to keep infra development, manufacturing in focus, says Sonam Udasi of Tata Mutual Fund

3. This year, the Nifty 50 had increased by roughly 19%. Which sectors have made the most contributions to the rally?

In terms of recognising the top performers, the standout sector is undoubtedly the Public Sector Enterprises (PSE) space, closely followed by 'REALTY' stocks. The respective indices for these sectors have witnessed remarkable gains of approximately 75% throughout the year. Additionally, the Auto Index has displayed robust traction, registering an impressive increase of over 40% during the same period.

4. Given that the information technology (IT) sector did not perform well in 2023, what are the prospects for this sector going forward?

The IT sector experienced a challenging period in 2022, primarily due to global concerns about the economic slowdown. However, this year has seen a steady comeback for the IT space, and it is poised to be one of the outperformers in the upcoming year.

Also Read: Stock Market Holiday: BSE, NSE to remain shut on Monday for Christmas

5. Could you suggest a few key sectors to avoid and watch out for in 2024?

The key sectors to keep a close eye on are IT, pharma, and fast-moving consumer goods (FMCG). These sectors fall under the defensive category and typically perform well in times of volatility and eventful conditions. Given the anticipated nature of the upcoming year, these sectors are considered safe bets and are likely to outperform. From a technical standpoint, after a brief pause, these sectors are exhibiting promising signs of performance for the coming year.

On the other hand, while not necessarily expressing caution, it is advisable for traders to consider timely profit booking in the mid-cap and small-cap baskets. Indicators suggest that these segments are currently highly overbought. In the event of an unexpected drawdown due to any negative outcomes from the key events lined up, recovery to purchasing levels might take an extended period.

Also Read: Market Outlook: Here's why stock market looks optimistic for CY24

6. What would be the main drivers for the market in 2024, and what trading advice would you give?

The upcoming year promises to be action-packed, with two budget sessions, a crucial election in our country, and a US election on the horizon. Expectations include high volatility with an underlying bullish trend. Traders are advised to view downward swings as opportunities to buy, strategically booking profits as the market continues its ascent. It is advisable to steer clear of complacent bets and instead concentrate on frontline counters for a more proactive trading approach.

Also Read: 2023 in review- Domestic copper demand rides on economic growth momentum amidst global headwinds.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.